These measures are very do-able and would contribute to better fiscal management, thus equipping the government to fulfil the hopes and expectations of its people.

By Shalini Mathur, Associate Director - Tax & Regulatory practice, EY

Two aspects that would be weighing on the finance minister's mind as he presents his maiden Budget are the grim fiscal situation and people's great expectations from the government to announce an action plan for reviving investments and economic growth. In the first two months itself of the current financial year, the fiscal deficit has crossed 45% of the interim budget estimates for 2014-15. With the global crude oil prices moving up due to Iraq crisis and likelihood of rain delay/deficiency that could impact food inflation, it is not an auspicious beginning to an even otherwise challenging year.

The economic revival would need reforms on several fronts. The issues outlined below are some such aspects that may be considered by the government in this context.

One of the sectors that clearly need supportive policies is the manufacturing sector. Compared to the average growth in three years over 2005-06 to 2007-08, the average growth over 2011-12 to 2013-14 fell for the manufacturing sector by as high as 9%. Construction and mining sectors also had the same fate with a fall of 7% and 5% respectively during the above mentioned period.

All these are critical and employment intensive sectors but have been suffering from the problem of idle capacity due to regulatory restrictions as well as fall in demand. Government should clear regulatory road blocks in major infrastructure and other investment projects and focus on institutional changes to smoothen the process of investment. For example, complete transparency should be built into handling natural resources such as land, minerals, coal and spectrum. Moreover, the environmental clearances can be shifted to a single 'Green Regulator'.

Another area that needs attention is the greater use of non-conventional energy. To set an example, all central government undertakings, government department buildings, educational institutions and medical institutions should be mandated to set up grid-connected solar/non-conventional energy facilities. These users are claimants of priority power supply from the grid and at a lower cost. India has a natural potential for generation of solar power. Small quantities of power generated by these buildings can be used to partly fulfil the requirement of the building occupants, thus easing any supply bottlenecks. The surplus, if any, can be fed into the grid.

It may also be kept in mind that the price of power generated from solar plants installed today is at par with or lower than the commercial tariff for consumers. In fact, if one were to consider the opportunity cost of using the fossil fuels and arrive at a 'shadow cost' after taking into account the vulnerability of the Indian economy to currency fluctuation, subsidies and oil cost, the shadow cost will be 30% higher than the actual cost.

India is the world's fourth-largest crude oil consumer with crude oil constituting more than a third of its total import bill. The government often faces pressures to subsidise some sectors in response to the unexpected 'shocks' such as the current Iraq situation which swell up the oil prices. The government may consider completely delinking the petroleum sector from the Budget. To make the oil price movement more evenly spread, an Oil Price Stabilisation Fund may be set up outside the Budget mechanism, with a one-time budgetary support of Rs 10,000 crores. This amount would still be lower than the amount of oil subsidies. SEBI's recent announcement about the listed PSUs to achieve a minimum public shareholding of 25 per cent within three years is another measure that could bring in more funds for investments and help in reviving the economic growth. It is estimated that the sale of shares in 36 PSUs where the public shareholding is less than 25% could help the government raise about Rs.60,000 crore. The PSUs, departments (e.g. defence) and departmental enterprises (e.g. post & telegraphs and railways) have large, currently unproductive landholdings. The land, real property and spectrum space available can be productively utilised by their monetisation either through direct sale or using them to raise funds. The revenue from this source can then be included in the Budget as non-tax revenue. Finally, tax administrative reforms and improving the dispute resolution mechanisms is an agenda that should be taken up by the government in the right earnest. The amount stuck in litigation at various levels for income tax, central excise and service tax in FY 2012 was estimated to be more than Rs 5.5 lakh crores, which is about 6% of the GDP for 2011-12! Even if half of this amount is unlocked, it could release a significant quantum of revenue for the government. The TARC Report has provided an excellent blueprint of the reforms needed to reengineer the tax administration. These should be implemented at the earliest.

The above measures are very do-able and would contribute to better fiscal management, thus equipping the government to fulfil the hopes and expectations of its people.